Circuit Breaker
An automatic trading pause triggered by an extreme price move.
Also called: trading halt · limit up limit down · halted
In plain language
Exchanges halt trading in a security, or the entire market, when prices move beyond defined thresholds in a short window. The pause is meant to let information disseminate.
For an individual stock, a halt typically lasts several minutes. Market-wide breakers trigger at set percentage declines and can close markets for the day at the extreme.
During a halt you cannot trade at all. Your position is frozen and your stops cannot execute — and price often reopens far from where it stopped.
Why it matters
A halt is a period where your risk controls are switched off by the exchange. This is the clearest argument for sizing so that a single position cannot do serious damage.
Common mistakes
- Assuming a stop will protect you through a volatility halt.
- Placing market orders immediately on a reopen when spreads are at their widest.
Keep exploring
These concepts are connected. Understanding one usually makes the next one easier.
How much and how quickly an asset’s price moves over a given period.
How easily an asset can be bought or sold without moving its price.
The difference between the price you expected and the price you actually got.
A jump between one period’s close and the next period’s open with no trading in between.
A predefined exit that closes a losing trade before the loss becomes serious.